Kwality Spinning Mills P Ltd., CHENNAI V. ACIT, Coimbatore

ITA 437/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7682 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: A S SRIRAM
• Keywords: Business income; Reasonable cause

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , . , $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ( . / I.T.A.NOS.437 TO 440/MDS/2015 ( / ASSESSMENT YEARS : 2009-10 TO 2012-13) M/S. KWALITY SPINNING MILLS P.LTD. UDUMALPET ROAD, POLLACHI-642 003. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, SALARY CIRCLE-I COIMBATORE. PAN:AABCK3313J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.S.SRIRAM,ADVOCATE /RESPONDENT BY : DR.B.NISCHAL, JCIT /DATE OF HEARING : 27 TH JANUARY, 2016 /DATE OF PRONOUNCEMENT : 31 ST MARCH, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: THESE FOUR APPEALS ARE FILED BY THE ASSESSEE AGGRIE VED BY THE SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE ALL DATED 23.0 1.2015 IN ITA NOS. 187 TO 184/13-14 PASSED UNDER SECTION 271B R.W.S.250 OF THE ACT FOR THE ASSESSMENT YEARS 2009- 10 TO 2012-13 RESPECTIVELY. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS APPEALS, HOWEVER, THE CRUX OF THE COMMON ISSUE IN A LL THESE 2 ITA NO.437 TO 440/MDS/2015 APPEALS IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BY RESTRICTING THE PENALTY TO RS.1,00,000/- AS AGAINST RS.1,42,651/- AND RS. 1,4 1,131/- FOR THE ASSESSMENT YEARS 2009-10 & 2010-11 RESPECTI VELY AND CONFIRMING THE MINIMUM PENALTY OF RS.1,50,000/ - FOR THE ASSESSMENT YEARS 2011-12 & 2012-13 LEVIED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 271B OF THE ACT. S INCE THE ISSUE INVOLVED IS COMMON IN ALL THESE APPEALS, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. BRIEF FACTS ARE THAT A SURVEY WAS CONDUCTED ON 04.09.2013 IN THE PREMISES OF THE ASSESSEE SINCE TH E ASSESSEE HAD NOT RESPONDED TO THE NOTICE SENT UNDER NON- FILERS MONITORING SYSTEM. DURING THE SURVEY PROCEED INGS, IT WAS NOTICED BY THE LEARNED ASSESSING OFFICER THAT T HE ASSESSEE COMPANY IS DOING JOB WORK WITH A SALES TUR NOVER RANGING FROM RS.2.5 CORES TO RS.3.5 CRORES FOR THE ASSESSMENT YEARS UNDER CONSIDERATION AND HAS NOT F ILED ITS RETURNS OF INCOME FOR ALL THESE ASSESSMENT YEARS UN DER CONSIDERATION. IT WAS FURTHER NOTICED THAT THE ASSE SSEE HAD 3 ITA NO.437 TO 440/MDS/2015 NOT AUDITED ITS BOOKS OF ACCOUNTS AND FILED THE A STATEMENT TO THAT EFFECT WAS RECORDED FROM THE MANAGING DIREC TOR OF THE ASSESSEE COMPANY MR. M.MEYYAPPAN. FOR THE ABOVE REASONS THE LEARNED ASSESSING OFFICER WAS OF THE VI EW THAT IT IS A FIT CASE TO LEVY PENALTY UNDER SECTION 271B OF THE ACT AND ACCORDINGLY LEVIED PENALTY OF ` 1,42,651/- AND RS. 1,41,131/- FOR THE ASSESSMENT YEARS 2009-10 & 2010-11 RESPECTI VELY AND RS.1,50,000/- FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS), TAKING INTO CONSIDERATION OF THE PROVISI ONS OF SECTION 271B THE ACT, THAT PENALTY CAN BE LEVIED @ 1 % OF TOTAL SALES / TURNOVER OR RS.1.00 LAKH, WHICHEV ER IS LESS, RESTRICTED THE PENALTY FROM ` 1,42,651/- AND RS. 1,41,131/- FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11 RESPEC TIVELY TO ` 1,00,000/-. HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE PENALTY OF RS.1, 50,000/- FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13 AS IT WAS IN ACCORDANCE WITH THE ACT. 4 ITA NO.437 TO 440/MDS/2015 5. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE MANAGING DIRECTOR OF THE ASSESSE E COMPANY MET WITH CAR ACCIDENT AND WAS INJURED DUE T O WHICH HE WAS NOT ABLE TO ATTEND THE BUSINESS AFFAIRS OF T HE COMPANY. FURTHER THERE WAS LABOUR UNREST IN THE COM PANY WHICH AGGRAVATED THE CRISIS IN THE COMPANY. THERE W ERE OTHER SEVERAL PROBLEMS FACED BY THE COMPANY DUE TO POWER CRISIS. FOR THE ABOVE STATED REASONS, THERE WAS A SLIGHT LA XITY ON THE PART OF THE COMPANY ON TAX RELATED LEGAL COMPLIANCE . FURTHER IT WAS ARGUED BY THE LEARNED AUTHORIZED REPRESENTAT IVE THAT THE PROVISIONS OF SECTION 271B OF THE ACT ARE NOT A UTOMATIC AND CONSIDERING THE REASONABLE CAUSE OF THE FAILURE ON THE PART OF THE ASSESSEE TO FILE TAX REPORT UNDER SECTI ON 44AB OF THE ACT WITHIN THE PRESCRIBED TIME LEVY OF PENALTY MAY BE DELETED. THE LEARNED AUTHORIZED REPRESENTATIVE ALSO SUBMITTED THAT AS ON DATE, THE AUDIT REPORTS FOR AL L THE RELEVANT ASSESSMENT YEARS ARE FILED BEFORE THE REVENUE AND THE SAME IS NOT IN DISPUTE. THE LEARNED AUTHORIZED REPRESENTATIVE ALSO PLACED RELIANCE IN THE CASE OF M/S HINDUSTAN STEEL LTD. VS STATE OF ORISSA REPORTED IN 83 ITR 26(SC). 5 ITA NO.437 TO 440/MDS/2015 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, ARGUED IN SUPPORT OF THE ORDERS OF THE REVENU E. 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD. THE REASONS AD DUCED BY THE LEARNED AUTHORIZED REPRESENTATIVE THAT THE MANA GING DIRECTOR OF THE COMPANY WAS INCAPACITATED DUE TO CA R ACCIDENT AND FACING SUBSTANTIAL HARDSHIPS DUE TO LA BOUR UNREST AND POWER CRISIS ARE NOT IN DISPUTE. IN THES E CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT T HERE WAS REASONABLE CAUSE FOR THE FAILURE ON THE PART OF THE ASSESSEE COMPANY FOR NOT FILING THE AUDIT REPORT UNDER SECTI ON 44AB OF THE ACT. FURTHER, INVOKING SECTION 271B OF THE ACT IS NOT MANDATORY AND THE REVENUE HAS DISCRETION FOR LEVYIN G THE PENALTY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. IN THE CASE OF M/S HINDUSTAN STEEL LTD. VS STATE OF ORISSA REPORTED IN (1972) 83 ITR 26 (SC), CITED BY THE LEARNED AUTHORIZED REPRESENTATIVE, THE HONBLE APEX COURT HAS CATEGORICALLY HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A 6 ITA NO.437 TO 440/MDS/2015 QUASI-CRIMINAL PROCEEDING, AND PENALTY WILL NOT ORD INARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELI BERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIO US OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS O BLIGATION. PENALTY WILL NOT BE IMPOSED MERELY BECAUSE IT IS LA WFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE T O PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION O F ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY I S PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE P ENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN TH ERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF ACT . DRAWING STRENGTH FROM THE ABOVE DECISION AND CONSIDERING TH E FACTS OF THE CASE WITH RESPECT TO THE HARDSHIPS FACED BY THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY AND THE BUSINESS C RISIS FACED BY THE ASSESSEE COMPANY AND THE PROVISIONS OF SECTION 271B OF THE ACT, WE ARE OF THE CONSIDERED VIEW THAT PENAL PROVISIONS OF SECTION 271B OF THE ACT CANNOT BE INV OKED IN THE CASE OF THE ASSESSEE. THEREFORE, WE HEREBY DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE PENALTY LEV IED UNDER SECTION 271B OF THE ACT FOR ALL THE RELEVANT ASSESS MENT YEARS 7 ITA NO.437 TO 440/MDS/2015 UNDER CONSIDERATION IN THESE APPEALS. IT IS ORDERE D ACCORDINGLY. 9. IN THE RESULT, ALL THE FOUR APPEALS OF THE ASSES SEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 31 ST MARCH, 2016 SD/- SD/- ( . ) ( . ) (G.PAVAN KUMAR) ( A.MOHAN ALANKAM ONY ) ! # / JUDICIAL MEMBER # / ACCOUNTANT MEMBER ! /CHENNAI, & /DATED 31 ST MARCH, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .